Certain Underwriters at Lloyd's, London v. Central Mutual Insurance Co.
12 N.E.3d 762
Ill. App. Ct.2014Background
- Golden Nail Builders (Builder) was named insured under a policy from Certain Underwriters at Lloyd’s, London (Underwriters); subcontractor Erik Electric had a policy from Central Mutual Insurance Co. (CMIC) that named Builder as an additional insured.
- Subcontract required Erik Electric to maintain at least $1M liability coverage and include Builder as an additional insured but said nothing about whether that coverage must be primary or excess.
- A sub‑subcontractor employee (Bawol) sued Builder and others for construction‑site injuries; Builder tendered defense to Underwriters (accepted under ROR) and to CMIC (CMIC declined).
- Underwriters filed this declaratory‑judgment action seeking a ruling that Underwriters was excess; cross‑motions for summary judgment followed.
- Trial court ruled CMIC’s policy provided only excess coverage (so Underwriters was primary) and that CMIC was not estopped from asserting policy defenses; appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CMIC’s additional‑insured endorsement is primary or excess | Underwriters: policies should be read coprimary (rely on Oak Builders) | CMIC: endorsement makes its coverage excess unless a contract specifically requires it be primary | CMIC’s policy condition precedent not met; CMIC is excess only (follow River Village) |
| Whether the two insurers’ "other insurance" clauses are irreconcilable (coprimary) | Underwriters: clauses conflict and should cancel to create coprimary coverage (Oak Builders) | CMIC: clauses are reconcilable — Underwriters primary unless other primary coverage exists; CMIC expressly excess absent contractual requirement | Clauses are reconcilable; Underwriters is primary, CMIC excess |
| Whether CMIC is estopped from asserting coverage defenses for failing to defend or file its own DJ suit | Underwriters: CMIC sat on sidelines, so should be estopped and liable for defense costs | CMIC: excess insurer has no duty to defend when another insurer has duty; CMIC timely denied tender and sought declaratory relief in its answer | No estoppel: CMIC had no duty to defend as excess insurer and timely sought declaratory relief by answering; not barred from asserting defenses |
| Whether CMIC had to initiate its own declaratory action to avoid estoppel | Underwriters: CMIC needed to bring its own DJ action | CMIC: answering plaintiff’s DJ complaint with affirmative defenses is a timely means to seek judicial declaration | Answer and affirmative defenses suffice; separate DJ not required here |
Key Cases Cited
- River Village I, LLC v. Central Insurance Cos., 396 Ill. App. 3d 480 (Ill. App. 2009) (condition‑precedent language in subcontractor’s policy made additional insured coverage excess where subcontract was silent)
- Ohio Casualty Ins. Co. v. Oak Builders, Inc., 373 Ill. App. 3d 997 (Ill. App. 2007) (where other‑insurance clauses rendered both policies excess and irreconcilable, insurers allocated coprimary responsibility)
- Employers Ins. of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127 (Ill. 1999) (insurer must defend under reservation or seek declaratory relief or risk estoppel)
- Outboard Marine Corp. v. Liberty Mutual Ins. Co., 154 Ill. 2d 90 (Ill. 1992) (summary judgment standards; contract interpretation as question of law)
- Korte Construction Co. v. American States Ins. Co., 322 Ill. App. 3d 451 (Ill. App. 2001) (estoppel may apply where insurer unreasonably delays forcing insured to sue)
- Ayers v. Bituminous Ins. Co., 100 Ill. App. 3d 33 (Ill. App. 1981) (answer to insured’s DJ complaint can constitute insurer’s pursuit of declaratory relief)